On the first day of the fiscal year, Hawthorne Company obtained an $88,000, 7-year, 5% installment note from Sea Side Bank. The note requires annual payments of $15, 208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4, 400 and principal repayment of $10, 808. The journal entry Hawthorne would record to make the first annual payment due on the note would include a debit to cash for $15, 208 credit to notes payable for $10, 808 debit to interest expense for $4, 400 debit to notes payable for $15, 208

Question

Business

Patricia Villarreal

16 July, 21:35

On the first day of the fiscal year, Hawthorne Company obtained an $88,000, 7-year, 5% installment note from Sea Side Bank. The note requires annual payments of $15, 208, with the first payment occurring on the last day of the fiscal year. The first payment consists of interest of $4, 400 and principal repayment of $10, 808. The journal entry Hawthorne would record to make the first annual payment due on the note would include a debit to cash for $15, 208 credit to notes payable for $10, 808 debit to interest expense for $4, 400 debit to notes payable for $15, 208

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Answers (1)

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Zara Gregory · Answer 1

Debit to interest expense for $4, 400

Explanation:

The journal entry is shown below:

Interest expense A/c Dr $4,400

Notes payable A/c Dr $10,808

To Cash A/c $15,208

(Being the due payment is recorded)

For due payment, we debited the interest expense and the notes payable account and credited the cash account as cash is paid for the first annual payment due on the note